Every business is faced with the question, Should I Collect Sales Tax in House, or pay an outside service to do it?
Avalara and their AvaTax program work with EAutomate and are recommended by ECi. They provide a customized Avalara AvaTax connector, or integration right within e-automate.
- Learn more about their offerings at avalara.com
- Whether you use their services or not, you can access this link to download tax tables:
- You can also get on their mailing list for updates to the tables.
You can download tax tables for free from Avalara (at the link above). These are generic and don't get into the service vs goods detail but should work. Worst case, you will probably collect more than necessary. I am pretty sure they are only broken down to a zip code level which may cause a few minor discrepancies.
Before you decide to collect your own sales tax, get with your accountant about Sales Tax Nexus
& Before you decide, get with your accountant about Income Tax Nexus
Things to consider when doing your own sales tax collection and reports.
- Getting sales tax “status” in any state
- How will I remit?
- How often must I file?
- Will I have tax exempt status?
- Will obtaining a sales tax number in another state, require our company to file an income tax return in that state.
- In some states it is a requirement
- In some states there is a minimum tax to be paid
- In some states you will be required to pay a corporation tax
If you decide to collect your own taxes, getting registered with the appropriate agencies (city, county and state) will be necessary.
- E-Automate can generate a report of tax liability, sorted by State, County and City with or without detail of each individual Invoice (sale) Reports shown below in Salmon are AvaTax reports, Yellow are Eauto reports.
The sales tax report has the parameters shown below show detail or hide everything but totals. This will group the revenue by tax authority (which is the way you will report to the sales tax department) , it's set for no detail (because for the report you only need totals) and you generally have to file monthly, so it's set for the proper period. Always run by period as running by date can miss the from date and/or the to date.
Report output is as follows: Total Taxed, Less NonTaxes (if applicable) = total, then the sales tax rate for that authority, and the resulting tax when multiplied,
- Some states will give you a discount on your total tax bill when paying “x” days before the due date. (Example: Arkansas Sales Tax due end of month following the month you are reporting for, but if you file and pay by the 20th, there is a 2% discount on the total tax due) Be sure to check with your state(s)
- Tax Returns can be filed without payment.
- There may be a penalty associated with late filing, as well as late paying.
How will I Maintain Tax Tables?
ECi does not have a utility to update tax authority, they recommend using the Avalara Add-On.
If you don’t use AvaTax, every quarter (or more often) you’ll receive a notice from the State or taxing authority, of the rate changes and dates they should take effect. Best Practice would be to create an outlook reminder and then change the rates the night before they are to take effect.
Remember, you can also download tax tables for free from Avalara.
Note: You will need to pull everything out of the contract billing queue and then put it back in for the new tax rates to apply. Otherwise, everything in the queue is locked down and untouched. This could be a huge part of your billing and you’ll want to get those higher tax rates applied, billed and collected.
From the users I’ve spoken with, relying on the mail updates is probably the best bet for receiving updates in a timely manner. I received updates before Avalara knew about them or had them implemented.
If you are remitting the taxes (not using AvaTax) you will list the total sales for each authority you are paying tax for. The report should have the effective rate of tax and compute the remittance. (As shown in the above screen shot) If this doesn’t agree with your total tax collected, check the sales tax rate – You’ll probably be 45 to 60 days into the rate change, but will catch it fairly soon. Best practice could be to prepare the report and balance right after month end to catch rate changes. You can always file and remit at a later date.
It would be worthwhile to check once a year that the higher tax rate/jurisdictions are current. Running the A/R tax report and determining where the largest liability is would be a good start. Most likely it will be the state(s). Most of the state returns require the cities and counties to be remitted along with the state total. If the state rates are good and the dealer is putting forth effort to collect and remit, their exposure would be minimal.
Related: Best Practices - Sales Tax Assessing, Configuring, Collecting and Remitting without Avalara, Overview and Sample (Click Here)
And Best Practices - Setting Tax Options in E-Automate, Overview and Sample (Click Here)